FDI and the relative wage in a North South global economy
AbstractThis paper examines the effect on relative wages when FDI occurs from the North to the South. The Northern firms undertake FDI to take advantage of the lower wage of unskilled labor in the South. The key assumption is that FDI from North to South occurs in an unskilled labor intensive production activity, but that activity is located in a sector that is relatively skill-intensive. It is shown that FDI leads to an increase in the relative wage of skilled labor in both North and South. It is also found that FDI may increase unemployment of unskilled labor in the South.
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Bibliographic InfoPaper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 03-03.
Length: 31 pages
Date of creation: Aug 2003
Date of revision:
FDI; Relative wage; North-South trade; Vertical integration; Arms-length trading;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-08 (All new papers)
- NEP-IFN-2004-01-08 (International Finance)
- NEP-LAB-2004-01-08 (Labour Economics)
- NEP-SEA-2004-01-08 (South East Asia)
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